Monday, December 21, 2015

Economy is all about debt - but you knew that - but with less efficacy

GDP and Total Non-Financial Sector Debt are on different scales. Even though GDP, red, is on top it is the left scale and is smaller than debt.

What the chart above shows is that the economy grows on debt.

The chart below uses real GDP. It is clear that since 2000, debt, excluding banks and other financial institutions own debt, has grown faster than inflation adjusted GDP. Meaning inflation has been a more important and provides apparent growth. Meaning debt is pushing GDP growth but with less efficacy.